International finance is the branch of economics that studies the dynamics of exchange rates, foreign investment, and how these affect international trade. It also studies international projects, international investments and capital flows, and trade deficits. It includes the study of futures, options and currency swaps. Together with international trade theory, international finance is also a branch of international economics.
Some of the theories which are important in international finance include the Mundell-Fleming model, the optimum currency area (OCA) theory, as well as the purchasing power parity (PPP) theory. Moreover, whereas international trade theory makes use of mostly microeconomic methods and theories, international finance theory makes use of predominantly intermediate and advanced macroeconomic methods and concepts.
exchange rate: the price of one currency in terms of another is called exchange rate.
See also
External links
- Center for International Finance & Development University of Iowa research center, includes a 300 page E-book.
- Institute of International Finance The Global Association of Financial Institutions; fostering global financial stability.
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